Prince Al-waleed bin Talal (officially the richest Saudi and a member of the ruling family) has gone on record to say, “We will not see $100-a-barrel oil again.” Recent weakness (an understatement, no doubt) in crude oil notwithstanding, this is still a very powerful statement. Let’s look at some of the causes, effects, risks and why this may just be true.
Reduction in oil prices invariably affects the entire global ecosystem – producers, consumers, oil economies etc. While Talal’s statement is a bit jarring, considering his position and control over oil markets, there is still room for oil prices to shoot up and normalise in the near future, given the range of issues global economies face and emergence of Shale gas as replacement to oil. Here’s a brief overview:
A recap of what the last 6 months have looked like for oil prices
Gains for fiscal management:
Fiscal management is managing and running an organisation, government or economy within a stipulated budget.
(The writer is former senior manager, corporate finance & risk management, Tata Steel)
(This story appears in the 06 February, 2015 issue of Forbes India. To visit our Archives, click here.)
How soon can we see major investment in the domestic, upstream oil and gas sector? Remember, this is in line with Prime Minister Narendra Modi's "Make in India" initiative, to give domestic manufacturing a major push Industry analysts predict a major chunk of investment in the domestic oil and gas sector in the next 5 years. In line with Prime Minister Narendra Modi's 'Make in India' initiative. http://goo.gl/2pu7ve
on Feb 10, 2015Well written and quite exhaustive. Gives a neat analysis of what has been happening when we have been thinking..what the hell!
on Jan 21, 2015Interesting. However, \"At the same time, fact remains that lasting GDP growth comes from increase in demand and investment, not from reduction in costs. \" -- not necessarily true. Reduction in ongoing costs (i.e., reduction in inefficiencies) result in comparative advantage over other nations (i.e., China), which could result in long-term growth. Any reduction in fuel costs should theoretically make manufacturing sector more competitive. Secondly, reduced fuel prices might cause the Rupee to strengthen, which is bad for the economy in its current state, as Indian TFP is not competitive with Chinese at stronger rupee levels.
on Jan 21, 2015Nice informative article. It is good to see how benefits of reduced oil prices are split between end-users, government and OMC. Some people irrationally expect that the benefits should pass to ultimate users forgetting that when the prices were skyrocketing, very limited increase was passed to them.
on Jan 21, 2015Neat summary and analysis by the author. This indeed will be an interesting space to watch - if oil does fall to $20, then we can definitely turn the dial to \'negative\' for India. Also, loved the last line re gold!
on Jan 21, 2015